IPD/MSCI Asset Owner Survey - PDF Free Download

IPD/MSCI Asset Owner Survey: Shining a Light on Misalignments through the Investment Process Objectives and execution options can create a disjointed investment process Board of Trustees/CIO Real Estate Dept Real Estate Managers Theory Allocation Strategy Implementation $ $ Reality Limited clarity on Real Estate Risks Misaligned policy benchmarks Cannot see impact of property specific factors Source: IPD 2014 Investment Property Databank Ltd. All rights reserved. ipd.com 2

Real Estate Represents 8 12% of Exposure for Most Mature Investment Markets, with Significant Variations Across Regions Lowest allocations in Asia and Nordics due to Legacy of early 1990s crisis (Japan and Sweden) Emergence of new AO s ramping up Real Estate (Nordics and Asia) Allocations set to grow across all markets Total assets and real estate exposure across regions 2014 Investment Property Databank Ltd. All rights reserved. ipd.com 3

Exposure Varies Within Regions as Much as Between Them No relationship between size and allocation to real estate Group of global asset owners with >$15bn each, increasingly internalizing % Real Estate holdings across regions 2014 Investment Property Databank Ltd. All rights reserved. ipd.com 4

Significant Variations also by Investment Style & Geography Style: Core dominates but 45% playing other roles especially U.S., Asia and ME. REITs low, except Netherlands Geography: home bias remains but appetite for non domestic growing across all markets Investment Style Geographic focus 2014 Investment Property Databank Ltd. All rights reserved. ipd.com 5

Real Estate Risk Management is Starting to Improve, But Challenges Remain 70% of Asset Owners have a real estate Policy benchmark, but this is often misaligned with strategy, particularly in Asia, Benelux, U.S. and Nordics Benchmark Usage Benchmark Alignment Note: Based on % of asset owners in each category, not value of real estate. Benchmark alignment based on those for which a Policy benchmark is in place Source: MSCI/IPD 2014 Investment Property Databank Ltd. All rights reserved. ipd.com 6 6

Huge Variations in Approach to Real Estate Risk Management Real estate within the multiasset portfolio Understanding of RE Behavior & clarity of objectives Integration with SAA Recognition of pricing Real Estate risk monitoring CIO drill through insight Benchmarks strategic& mandate Portfolio and asset specific risk metrics L E S SE R STRATEGIC ROLE OF REAL ESTATE G R E A T E R Sophistication of approach to Real Estate risk management LAGGARDS THEORISTS LEADERS INDUSTRY NORM L E S S RISK MONITORING M O R E Note: Positioning of individual asset owners on two key dimensions of risk management Source: MSCI/IPD 2014 Investment Property Databank Ltd. All rights reserved. ipd.com 7

Real Estate Asset Management Implications Clear insights for best practice revolving around the range of dimensions of real estate risk management Direct relevance for major investors and managers Insights into best practice Dimensions for strengthening relationships between: RE departments and Risk functions Investors and managers Monitoring of RE portfolio risk Risk management approach: key criteria and rating of Global Leaders and Laggards Asset specific risk monitoring by CIO Mandate benchmarks Benchmarks for RE exposure Global leaders Clear Objectives for RE in SAA 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 CIO oversight/involvement Global laggards Recognize RE behaviour Measures of RE behaviour for allocation RE behaviour integrated with SAA Recognition of real estate pricing in SAA Note: Rating of sophistication of approach on each criterion (0 = very weak, 5 = very strong). Based on average scores for five best and worst performers Source: MSCI/IPD 2014 Investment Property Databank Ltd. All rights reserved. ipd.com 8

Disclaimer 2014 Investment Property Databank Ltd (IPD). All rights reserved. This information is the exclusive property of IPD. This information may not be copied, disseminated or otherwise used in any form without the prior written permission of IPD. This information is provided on an "as is" basis, and the user of this information assumes the entire risk of any use made of this information. Neither IPD nor any other party makes any express or implied warranties or representations with respect to this information (or the results to be obtained by the use thereof), and IPD hereby expressly disclaims all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall IPD or any other party have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. 2014 Investment Property Databank Ltd. All rights reserved. ipd.com 9